Why Uniqlo is making big push in Europe

By Dominique Vidalon, Pascale Denis and Emma Thomasson, Reuters

PARIS/BERLIN - Japanese casual wear chain Uniqlo opened its first store in Germany on Friday, as it accelerates expansion in Europe in a bid by its parent company Fast Retailing Co Ltd to become the world's top fashion retailer by 2020.

Fast Retailing wants to open more stores abroad as it sees turnover growth slow in its home market, where the population is ageing and declining and where it lowered forecasts for Uniqlo's sales on Thursday.

Uniqlo's debut German store opened its doors on Berlin's popular shopping boulevard Tauentzienstrasse, with a total floor space of 2,700 square meters over three levels, making it the chain's largest in Europe.

Featuring revolving mannequins in origami headdresses and LED ticker-tapes listing all the cities where Uniqlo is present, the store is not far from outlets run by its two biggest rivals - Inditex SA's Zara and Hennes & Mauritz AB - which Fast Retailing wants to outflank globally in coming years.

"We have big goals in Europe - we would like to have the same business in Europe as in the U.S.” Yukihiro Katsuta, head of research and development for Uniqlo, told Reuters in an interview in Paris, where another new store opens on April 25.

Fast Retailing, whose brands also include Theory, J Brand, GU, Comptoir des Cotonniers and Princesse tam.tam, aims to have around 100 Uniqlo outlets in the United States in coming years against 17 now, but has not previously indicated medium-term goals for store openings in Europe.

With more than 1,300 stores worldwide including 856 in Japan, Uniqlo has focused its overseas expansion so far on China and South Korea, but is now accelerating a push into the United States and Europe, where it currently has 18 stores.

IMPORTANT MARKET

Uniqlo's global expansion has not always been smooth and the group was forced to close a number of UK stores for instance in 2003 after heavy losses. But its ambitions are undimmed.

"We are ambitious for Europe ... Germany is definitely an important market for us,” said Berndt Hauptkorn, CEO of Uniqlo Europe, declining to give figures on sales goals.

Uniqlo has made its name with affordable, quality garments like T-shirts, cashmere sweaters and lightweight down jackets, as well as underwear in high-tech fabrics that stay cool in summer and warm in winter.

Unlike Zara and H&M, which focus on quick turnover of fast-changing styles, Uniqlo has a slower production cycle based on long-term partnerships with its suppliers, which Hauptkorn said enables it to make high-quality products.

Inditex and H&M have weathered the economic downturn in their core European markets relatively well, but competition is picking up from discounters like Primark (part of Associated British Foods Plc) and U.S. group Forever 21, as well as online firms such as ASOS Plc.

Inditex has more than 6,300 stores globally, while H&M has more than 3,000, including 418 in its biggest market Germany.

After Berlin and Paris, Uniqlo has identified a number of cities such as Milan and Barcelona as possible destinations, although it has "nothing in the pipeline at this time", said Jorgen Andersson, global co-chief marketing officer.

"Finding the right location is one of the biggest challenges," Andersson added, noting Uniqlo had to compete with rivals such as luxury groups LVMH and Kering as well as the likes of Zara for prime sites.

Uniqlo opened its first store outside Asia in London in 2001 and now has 10 stores in Britain, four in Russia and four in France, where it will add another on April 25 in the upmarket Le Marais district in Paris in a mid-19th century former foundry.

The company recently pulled out of talks to buy U.S. clothing retailer J.Crew Group Inc from its private equity owners, three people familiar with the matter said, but Katsuta declined to comment on any acquisition plans.